Chevron drops Anadarko takeover pursuit. Takes $1B termination fee

U.S. oil major Chevron will not be increasing its initial bid for the takeover Anadarko and expects the previously agreed deal to be terminated as Anadarko has entered into takeover talks with Oxy which recently submitted a superior offer.

Chevron on Thursday said that “under the terms of its previously announced Merger Agreement with Anadarko Petroleum Corporation (NYSE: APC), it will not make a counterproposal and will allow the four-day match period to expire. Accordingly, Chevron anticipates that Anadarko will terminate the Merger Agreement.”

“Winning in any environment doesn’t mean winning at any cost. Cost and capital discipline always matter, and we will not dilute our returns or erode value for our shareholders for the sake of doing a deal,” said Chevron’s Chairman and CEO Michael Wirth. “Our advantaged portfolio is driving robust production and cash flow growth, higher investment returns and lower execution risk. We are well positioned to deliver superior value creation for our shareholders.”

Upon termination of the merger agreement with Chevron, Anadarko will be required to pay Chevron a termination fee of $1 billion.

“Consistent with Chevron’s commitment to superior shareholder returns, the company plans to increase its share repurchase rate by 25 percent to $5 billion per year,” Chevron said.

Chevron and Anadarko had on April 12 entered into a definitive agreement with Anadarko Petroleum Corporation to acquire all of the outstanding shares of Anadarko in a stock and cash transaction valued at $33 billion, or $65 per share.

“Winning in any environment doesn’t mean winning at any cost. Cost and capital discipline always matter, and we will not dilute our returns or erode value for our shareholders for the sake of doing a deal.”

Less than a fortnight later, the U.S. firm Occidental Petroleum (Oxy) entered into the race for Anadarko, saying it would offer $76.00 per share, 50-50 cash and stock, in which Anadarko shareholders would receive $38.00 in cash and 0.6094 shares of Occidental common stock for each share of Anadarko common stock, saying its offer was a premium of approximately 20% to the value of Anadarko’s, at the time, pending transaction with Chevron. The value of the Oxy offer was estimated at $38 billion.

Following Oxy’s bid, Anadarko said it would carefully review it, and on April 29 said it would resume talks with Oxy. At day later, billionaire Warren Buffett’s company Berkshire Hathaway committed to invest $10 billion in Occidental Petroleum, subject to Oxy’s entering into and completing its proposed acquisition of rival Anadarko.

Oxy then on May 5, upped the ante, revising the proposal to include a bigger portion of cash. The offer was for Anadarko shareholders to receive $59.00 in cash and 0.2934 shares of Occidental common stock per share of Anadarko common stock.

In related news, Oxy entered into an agreement with France’s Total, to sell Anadarko’s assets in Africa (Algeria, Ghana, Mozambique, South Africa) for a consideration of $8.8 billion in the event of successful completion of Occidental’s ongoing bid for Anadarko.

Occidental President and CEO, Vicki Hollub, said:”The financial support of Berkshire Hathaway as well as the agreement we announced with Total allows us to delever our balance sheet while focusing our integration efforts on the assets that will provide the most value for us.”